- AHIP is cautioning federal regulators to move slowly and carefully when expanding the availability of health reimbursement arrangements (HRAs) as a more prominent means of paying for healthcare services.
In response to a request for comment on a proposed rule regarding an expanded role for health reimbursement arrangements (HRA), AHIP stated that HRAs could “create new opportunities for businesses of all sizes to offer new coverage options to their employees while strengthening the individual market with new potential enrollees” – if the safeguards and regulations regarding these arrangement are robust enough.
HRAs allow employers to provide their employees with a tax-advantaged allowance that can be used to purchase healthcare services, often in addition to traditional insurance. The employer decides how much to give to employees on a monthly or yearly basis.
In some arrangements, funds can be used to pay premiums on health insurance. In general, HRAs are intended to cover out of pocket expenses or services that are not included in an individual’s health plan.
For smaller businesses that may not be able to offer a full health plan, HRAs can act as less comprehensive way of providing some assistance for employee expenses.
In October of 2018, the Department of Labor, Department of the Treasury, and HHS issued a proposal to expand the availability of HRAs in an effort to help individuals manage their healthcare spending more effectively.
Under the proposal, employers would be able to offer a maximum of $1800 per year to employees to cover expenses.
The rule would allow all HRAs to cover premium payments for short-term limited duration insurance (STLDI) plans, which tend to offer barebones coverage and are not required to comply with the consumer protections of the Affordable Care Act.
AHIP strongly supports the ACA’s protections for people with pre-existing conditions and recognizes the important role of the essential health benefits package in creating comprehensive, affordable health plans.
As a result, the association also believes that using HRAs to fund premiums for STLDI plans could result in the destabilization of the traditional employer-sponsored insurance market.
STLDIs hold the potential to leave consumers financially vulnerable to plans that do not truly meet their needs as employers circumvent ACA requirements in an effort to reduce their expenses.
“Certain forms of coverage that would not be considered comprehensive and do not meet the statutory definition of ‘individual health insurance’ – such as short-term limited duration insurance – should not be permitted to be integrated with an HRA,” the organization said in a letter addressed to the heads of the three departments.
“Permitting HRAs to be integrated with STLDI would open the door to employers replacing coverage that is prohibited from discriminating based on pre-existing conditions with coverage that may charge more for preexisting conditions or deny enrollment outright.”
Employers with generally healthier populations may decide that STLDIs are a workable option for their employees, which may have several negative consequences. Firstly, employees that do have higher healthcare needs may be left without an employer-sponsored plan that can cover their expenses.
“Those who elect to enroll in STLDI may find themselves lacking sufficient coverage when faced with an injury or illness,” AHIP said.
Secondly, shifting healthier employees away from the ACA market could dramatically unbalance the risk pool.
“This will increase premiums in the individual market for everyone, increase taxpayer spending on premium tax credits, and put the cost of coverage further out of reach for individuals who do not qualify for premium subsidies,” the organization noted.
AHIP also recommends that the federal government take steps to protect employer-sponsored coverage and supplemental benefit offerings.
“We ask the agencies to consider the impact of these new arrangements on employer-provided coverage and how to best advance innovations across market segments,” AHIP said.
“Ensuring that employers may continue to offer a range of supplemental benefits, such as dental and vision coverage, in addition to an Integrated HRA is essential for the health and financial security of the 181 million Americans who receive coverage through work.”
In order to ensure that HRAs can create positive new reimbursement opportunities without leaving employees without acceptable coverage options and the consumer protections provided by law, AHIP is encouraging the three departments to take a measured approach to implementing their HRA changes.
“As with any change of this size and complexity, adequate planning time is required,” the letter stated. “We recommend extending the applicability date at least 18 months from publication of the final rule so that health insurance providers and employers may adequately prepare for new benefit offerings.”
“Enforceable safeguards and non-discrimination protections are essential for these options to work for Americans. Clear rules on when an HRA can be offered, what types of plans can be purchased using these funds and on what terms will be key.”